Rejecting Obamacare’s Perverse Ultimatum

One of Obamacare’s central pillars, the individual mandate, boils down to a crude ultimatum. Buy health insurance or pay the price — a tax penalty of the greater of $695 or 2.5 percent of income, to be exact.

But what if it’s essentially impossible to buy health insurance — because no insurers are selling it? In several states — including Wyoming, Arizona, West Virginia, and South Carolina — that’s a real concern. And it’s one that a new Senate proposal seeks to answer.

Six Republican senators just introduced a bill that would exempt people from the individual mandate if they live in a county where there’s only one insurer — or where there are no insurers — selling coverage through their state’s Obamacare exchange.

That such a reform is even necessary is remarkable. The Obama administration promised that the exchanges would offer consumers numerous choices for coverage at affordable prices. They’ve delivered the opposite — fewer choices and higher costs.

The president never fathomed that this could’ve happened. Thanks to Obamacare, he said just three years ago, “Now you’ve got new competition, because insurers want your business. And that means you will have cheaper prices.”

Things haven’t turned out that way. Amid massive financial losses, insurers have been abandoning Obamacare’s exchanges. In August, Aetna announced that it would stop selling exchange plans in roughly 70 percent of counties it currently serves. UnitedHealth plans to scrap all of its exchange policies in 16 of the 34 states in which it operates. Humana, meanwhile, will offer individual exchange plans in only 11 states next year.

At the same time, Obamacare’s non-profit CO-OPs have been dropping like flies. Of the 23 created by the law, a mere six are still alive today — and just barely. New Jersey’s was the latest to implode, in early September. These CO-OP failures haven’t been cheap. Thus far, they’ve cost taxpayers north of $1.8 billion.

Last week, the House passed legislation that excuses from the individual mandate anyone enrolled in a failed CO-OP. The argument for that reform is simple enough: Obamacare isn’t holding up its end of the bargain — so why should CO-OP enrollees have to hold up theirs?

The same logic applies to exchange customers in states where all but one insurer has fled the system.

In Arizona, the situation has reached a crisis point. This year, seven insurers pulled out of Maricopa County, the state’s largest, leaving just one coverage provider for 126,000 enrollees.

After Aetna and UnitedHealth withdrew from Arizona’s exchange, Pinal County — home to 10,000 Obamacare enrollees — was left with no providers willing to sell coverage to its residents.

Blue Cross Blue Shield later agreed to reenter Pinal County, but that’s small consolation. As it stands, there is only one insurer in 13 of Arizona’s 15 counties. All the insurers active in the state are asking for rate increases — some as high as 122 percent.

Arizona’s story is hardly unique. In West Virginia, for instance, 82 percent of counties have only a single exchange-plan provider. With so little competition, it’s no surprise that insurers are hiking premiums. Next year, rates for individual exchange plans are expected to rise by nearly 37 percent.

Wyoming only has one insurer on its exchange. In 2017, the same is likely to be true in Alaska, Alabama, Oklahoma, and South Carolina.

All told, nearly one-third of U.S. counties will have to deal with an insurance monopoly on the exchanges in 2017, according to the Kaiser Family Foundation. Another 963 counties will have only two insurers to choose from.

Such meager competition is guaranteed to send insurance prices soaring.

That leaves millions of American families with two dismal options — either pay outrageously high Obamacare premiums, often from a monopoly provider, or pay a potentially steep fine for shirking the individual mandate.

Strong-arming Americans into buying coverage was always a bad idea. Now that Obamacare has laid waste to the individual coverage market, the individual mandate is downright perverse.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The Way Out of Obamacare (Encounter 2016). Follow her at @sallypipes.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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